Question
Parent Ltd owns 90% of Subsidiary Ltd.In the financial year ended 30 June 20X2 , Subsidiary Ltd sold inventory to Parent Ltd. Details regarding the
Parent Ltd owns 90% of Subsidiary Ltd.In the financial year ended30 June 20X2, Subsidiary Ltd sold inventory to Parent Ltd. Details regarding the transaction are as follows:
Cost to Subsidiary to produce inventory
$9000
Sale price of inventory to Parent Ltd.
$11000
Percentage of inventory still held by Parent Ltd at 30 June 20X2
30%
Percentage of inventory still held by Parent Ltd at 30 June 20X3
0%
Tax rate
30%
Round all your answers to the nearest dollar amount.If you believe no journal entry is required, select NULL for the account name, NA for the Dr or Cr, and enter 0 for the amount.Do not leave the amount blank.
Do not enter dollar ($) signs or commas (i.e. enter 10000 not $10,000).
Required:
(i) Prepare ny necessary journal entries in the consolidation journal to eliminate this transaction for the year ended30 June 20X2.
Answer
Cost of goods sold
Deferred tax asset
Deferred tax liability
Income tax expense
Inventory
NCI
NCI share of profit
Retained earnings
Revenue
NULL
Dr
Answer
Cost of goods sold
Answer
Dr
Cr
Answer
Answer
Cost of goods sold
Deferred tax asset
Deferred tax liability
Income tax expense
Inventory
NCI
NCI share of profit
Retained earnings
Revenue
NULL
Cr
Answer
(Eliminate the intra-group revenue/expense on the sale before tax)
Answer
Cost of goods sold
Deferred tax asset
Deferred tax liability
Income tax expense
Inventory
NCI
NCI share of profit
Retained earnings
Revenue
NULL
Dr
Answer
Answer
Cost of goods sold
Deferred tax asset
Deferred tax liability
Income tax expense
Inventory
NCI
NCI share of profit
Retained earnings
Revenue
NULL
Cr
Answer
(Adjust for tax effects of elimination of intra-group transaction)
(ii) Prepare ny necessary journal entries in the consolidation journal to eliminate this transaction for the year ended30 June 20X3.
Answer
Cost of goods sold
Deferred tax asset
Deferred tax liability
Income tax expense
Inventory
NCI
NCI share of profit
Retained earnings
Revenue
NULL
Dr
Answer
Income tax expense
Answer
Dr
Cr
Answer
Answer
Cost of goods sold
Deferred tax asset
Deferred tax liability
Income tax expense
Inventory
NCI
NCI share of profit
Retained earnings
Revenue
NULL
Cr
Answer
(Eliminate impact of prior year's intra-group transaction)
(iii) Prepare ny necessary journal entries in the consolidation journal to adjust the Non-Controlling Interests (NCI) allocation for the year ended30 June 20X3.
Answer
Cost of goods soldRevenue
Deferred tax asset
Deferred tax liability
Income tax expense
Inventory
NCI
NCI share of profit
Retained earnings
Revenue
NULL
Dr
Answer
Answer
Cost of goods soldRevenue
Deferred tax asset
Deferred tax liability
Income tax expense
Inventory
NCI
NCI share of profit
Retained earnings
Revenue
NULL
Cr
Answer
(NCI adjustment resulting from elimination of prior year's intra-group transaction)
Answer
Cost of goods soldRevenue
Deferred tax asset
Deferred tax liability
Income tax expense
Inventory
NCI
NCI share of profit
Retained earnings
Revenue
NULL
Dr
Answer
Answer
Cost of goods soldRevenue
Deferred tax asset
Deferred tax liability
Income tax expense
Inventory
NCI
NCI share of profit
Retained earnings
Revenue
NULL
Cr
Answer
(NCI adjustment resulting from current year's effects of intra-group transaction)
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Fundamental Managerial Accounting Concepts
Authors: Thomas Edmonds
6th Edition
78110890, 978-0078110894
